IRS Says US Taxpayers Invent Kids as Tax Dodge

January 8, 1991

By United Press International

NEW YORK

THE Internal Revenue Service has found that 7 million fewer American children were claimed on tax returns in 1987, data that shows many taxpayers claimed children who do not exist, The New York Times reported Sunday. In 1987, when the IRS required that Social Security numbers of all dependents over age 5 be listed on tax returns, 7 million American children - who had been listed in 1986 - were not claimed on annual tax statements, the Times said.

The IRS said the 7 million figure represented a 9 percent drop in the 77 million dependents claimed on 1986 returns and $2.9 billion more in yearly tax revenues, the paper said.

Evidence also shows Americans have been claiming child-care credits for baby sitters who are paid cash under the table, the Times reported. In 1989, it became required for taxpayers taking the dependent-care credit to identify who they were paying. In that year, 2.6 million baby sitters effectively vanished, with the number of taxpayers claiming the credit dropping by 30 percent, the newspaper said.

Eighty percent of the children who were not claimed in 1987 probably never existed, said IRS researcher John Szilagyi, who designed the proposal to require Social Security numbers from dependents and baby sitters.